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Multifamily Benefits

THE AFFORDABILITY TOOLKIT

Developed in Partnership with HR&A Advisors 37 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits

The Benefits of Multifamily Housing

Comprising 15% (20.6 million units) of the nation’s housing stock, multifamily rental housing plays a vast and diverse housing role that serves an essential and evolving purpose in communities across the country. At its core, multifamily housing increases the density, variety, and efficiency of a municipality’s housing. Multifamily housing broadly improves our in four far-reaching ways:

–– Invigorating economic vitality by improving the livelihood of workers and businesses –– Improving fiscal health by increasing the tax base and efficiently using public resources –– Increasing environmental sustainability by efficiently and operating residential units –– Enhancing quality of life by allowing for healthy, culturally vibrant, and place-based lifestyles This document explores the extensive benefits of multifamily housing while dispelling several misconceptions. 38 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits The Benefits of Multifamily Housing In any market, multifamily housing exhibits three fundamental characteristics that allow it to yield a far-reaching set of benefits.

Increased Density Multifamily housing allows for more housing units to be built on any given parcel of land. Increasing the density of can quickly expand the tax base and commercial vitality of an area. It also allows for more much-needed housing to be built in desirable areas with greater employment, easier access to transit, and generally a higher quality of life, as these areas typically are more land-constrained and expensive to build in.

AVERAGE NUMBER OF UNITS PER ACRE BY HOUSING TYPE1

176 36 13 3

5 stories stories stories Single detached

Wide Variety Greater Efficiency Multifamily housing serves a wide range of Multifamily housing is cost-effective and efficient types and needs. The wide range of to both build and operate. Development costs for available unit types, locations, and price points multifamily housing are far lower on a per-unit basis allows multifamily housing to accommodate a than single-family. Multifamily housing also makes unique variety of household types, income levels, more efficient use of utilities and other infrastructure. and lifestyle preferences.

Multifamily rental housing ersuare 7 foot cost of “offers a powerful tool to increase development residential density in downtown and suburban locations, while Total cost of 7, also accommodating a socio- developing 57, demographically diverse population." one unit

2 –– Journal of Housing Studies Multifamily Single-family detached

*Assuming median unit sizes of 2,400 SF for a single-family detached and 1,000 SF for an . 1 HR&A analysis of CoStar and U.S. Census data. 2 Rebecca Walter, 2018. “The geographic and sociodemographic transformation of multifamily rental housing in the Texas Triangle.” 3 Craftsman Handbook. 39 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Economic Growth and Vitality Multifamily housing stimulates and sustains local economies, neighborhood health, and overall economic competitiveness.

Multifamily housing At a national level, housing supports the expansion constraints and regulations are and diversification of estimated to have lowered aggregate the local workforce. economic growth by An expanding housing supply often both indicates 36% and allows for an expanding economy. Multifamily between 1964 and 2009.1 housing is the most efficient way to increase the supply of housing, which is necessary to accommodate employment and household growth. A lack of housing supply will either prevent growth or lead to the Due to a lack of housing in productive but displacement of existing households. highly regulated cities (such as New York and San Francisco), people have consistently Housing density can improve the productivity been priced out of optimal jobs. and lifestyle of people who work in employment centers with high traffic volume.As jobs cluster SHARE OF HOUSEHOLDS COMMUTING 30 MINUTES OR MORE TO WORK2 within employment centers that experience growing levels of traffic, commute times can be ameliorated 7 if people can find and afford housing near where they work. Because allow housing to be efficiently built in desirable areas near employment and transit, people living in apartments have shorter commute times on average.

Renters in All Single Multifamily rental housing attracts critical segments apartments apartment family of the workforce, such as younger households built 7 renters owners and households earning modest incomes. While multifamily housing serves households of all ages and income levels, it is uniquely able to provide young Of households younger than 35: people with the mobility and urbanism they often prefer and is able to provide affordably priced housing options in good locations. 7. 1 Million rent multifamily 6.2 million own single-family3

1 Chang-Tai Hsieh and Enrico Moretti, 2015. “Housing Constraints and Spatial Misallocation.” 2 “NMHC Quick Facts.” NMHC tabulations of 2016 American Community Survey. 3 2016 American Community Survey. 40 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Economic Growth and Vitality Multifamily housing stimulates and sustains local economies, neighborhood health, and overall economic competitiveness.

Denser housing and denser Multifamily housing enables cities support the formation neighborhood investment and growth of businesses. and commercial activity.

Denser urban areas are more economically Multifamily housing development is a signal and productive due to the networks that form when stimulator of neighborhood growth. firms and people locate near each other. As ideas are more freely exchanged between both collaborators and The development of multifamily housing tends to competitors, urban areas benefit from advancements in encourage the concentration of households and innovation.1 Multifamily housing contributes to this effect incomes needed to support new retail and commercial by significantly increasing urban density. development. At a time when retail footprints across the nation are receding, a notable increase in mixed- use developments containing residential with retail Emerging sectors of the economy and/or indicates that denser housing can attract and support commercial activity.3 “often place a premium on access to specialized business services, In other cases, multifamily housing is the necessary professional contacts, restaurants, piece to transform areas filled with predominantly and employee housing…these commercial uses (office, retail, public facilities) into aspirations can best be realized in vibrant, 24-hour mixed-use districts, as has been the mixed-use agglomerations." case for downtowns across many major cities.

–– Paul G. Lewis, Shaping Suburbia2 Residential has been the big “story over the last couple decades. Downtown, prior to that, evolved as PERCENTAGE OF PIPELINE PROPERTIES the location for commercial office PLANNED AS MIXED-USE4 and retail, and then for the major arts and cultural institutions." . –– Jon Scholes, President & CEO of the 5 . Downtown Seattle Association

1 Glaeser and Gottlieb, 2009. “The Wealth of Cities: Agglomeration Economies and 3 Forbes, 2018. “How Retail Continues To Change.” Spatial Equilibrium in the United States.” 4 Axiometrics, 2016. “Mixed Use Trending in Apartment Markets.” 2 Paul G. Lewis, 1996. “Shaping Suburbia: How Political Institutions Organize Urban 5 U.S. News Real Estate, 2016. “How Commercial Real Estate Is Changing Residential Development.” Housing.” 41 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Fiscal Health Multifamily housing improves fiscal health by both increasing revenues and decreasing costs, positioning local budgets to more effectively serve the public good.

Multifamily housing efficiently increases tax revenues for local governments.

Greater household density increases the tax base Denser development generates through expanding the number of both households and businesses. Denser households contribute more to property and sales taxes. Moreover, by stimulating 10 times commercial growth, multifamily housing can further more tax revenue per acre than increase local sales and business taxes. conventional suburban development.1*

2011 MUNICIPAL YIELD (PER ACRE) OF SELECT IN RALEIGH, NC 6-story mixed-use (multifamily & retail) $110,500 3-story office $30,100 3- to 4-story $26,100 Major $22,200 Single-family residential $2,800 Walmart $2,100

Multifamily housing reduces fiscal burdens by efficiently using public infrastructure and services.

Municipalities save significantly on costs incurred Compared to conventional suburban by critical physical infrastructure, such as new development, denser development saves roads, water lines, and sewer lines. Savings are experienced in upfront capital costs, operations and maintenance costs, and eventual replacement costs. 38% Denser development also leads to savings on the on the delivery of upfront costs of ongoing delivery of public services, such infrastructure, and as police, ambulance, and fire services. 10% on the cost of delivering public services.1*

*These results were arrived at by compiling findings from 17 studies, which span city, state, and national scopes. 1 Smart Growth America, 2013. “Building Better Budgets: A National Examination of the Fiscal Benefits of Smart Growth Development.” 42 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Environmental Sustainability Increased urban density benefits the environment by reducing carbon impact and preserving open space and natural amenities.

Density reduces the energy ENERGY CONSUMED PER RESIDENTIAL required to build, operate, UNIT (MILLIONS OF BTUS)2 2017 and service residential units. A Multifamily housing lowers the energy intensity of creating a housing unit, or the “embodied energy” A of extracting materials and building the structure. The energy savings can be substantial, as embodied energy can range from 10 to 45 percent of the total 1 S energy impact of a building through its lifecycle. Multifamily properties require less energy to S maintain on a per-unit basis, resulting in both energy and cost savings for residents and property managers. This energy impact is substantial, as Space Heating Water Heating Other residential and commercial buildings consume 41 percent of the nation’s energy each year.3 Air Conditioning Refrigerators

Multifamily housing decreases the resources used for infrastructure and services. Surrounding Energy consumption can be measured on a per- infrastructure, such as, roads, public transportation, unit or per-square-foot basis. Both metrics show street , water pipes, and sewage treatment, apartments use less energy after taking into also contributes to embodied and operational account home size, climate, and other important energy use. Multifamily housing makes uses of these characteristics (including whether the apartment resources much more efficiently. renter pays utility costs directly).4 Denser housing allows for the preservation of open spaces and natural amenities.

By requiring a smaller land footprint, multifamily Planned, compact growth uses housing helps to preserve open space and undeveloped land, natural amenities that can be difficult to preserve in sprawling areas. 20%-45% less land than unplanned, sprawling, “overspill” development.5

1 Nichols and Kockelman, 2014. “Life-Cycle Energy Implications of Different 4 Obrinsky and Walter, 2016. “Energy Efficiency in Multifamily Rental : An Analysis Residential Settings.” of the Residential Energy Consumption Data.” 2 HR&A analysis of 2017 Energy Information Administration data. 5 Burchell et al., 1998. Costs of Sprawl Revisited: The Evidence of Sprawl’s Negative and 3 Takano et al., 2015. “Life cycle energy balance of residential buildings.” Positive Impacts. 43 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Quality of Life Multifamily housing improves quality of life by improving public health, allowing for vibrant public spaces and amenities, and providing housing options for a variety of lifestyles.

Density increases connectivity.

Density allows for cities to be walkable and cyclable, for streetscapes to be attractively designed for high volumes of foot traffic, and for a wide variety of people to interact with each other. Not only does this improve the aesthetic experience of living in a city, it can positively affect public, physical, and . 50% 7 in 10 of surveyed Americans would like to renters are willing to downsize in walk or bike more instead of driving.1 order to live in a dense urban area.2 Density allows vibrant Varied housing provides public spaces and cultural choosing power. amenities to exist and thrive. By efficiently increasing the stock of housing available Denser housing helps to preserve open space in a city, multifamily housing allows people to more and public facilities and contributes to the volume easily choose where they live. People might be able and diversity of people who make these spaces to live nearer to their work or avoid being displaced interesting. Valuable cultural spaces that require high from or priced out of a neighborhood or municipality volumes of patronage to remain viable are made they prefer. They may choose to adopt a lifestyle that possible by densification. is unique to multifamily housing, such as ease of maintenance and walkability.

For consumers who want to be % OF SURVEYED HOUSEHOLDS VERY “able to go to the opera regularly or go SATISFIED WITH…4 to live major league baseball games, ntertainment living in large cities is a necessity." arks ublic Spaces Healthcare Services –– Ed Glaeser, Professor of Economics at Harvard3 Nearby Schools Retail Grocery ublic Transit orkplace roimity

Multifamily Single-family

1 Smart Growth America, 2003. “Measuring the Health Effects of Sprawl.” 2 Fannie Mae, March 2017. Consumer Omnibus Results. 3 Ed Glaeser et al. 2000. “Consumer City.” 4 http://www.fanniemae.com/resources/file/research/housingsurvey/pdf/nhs--affordability-perceptions.pdf 44 · HOUSING AFFORDABILITY TOOLKIT Multifamily Benefits Misconceptions Contrary to some misconceptions, multifamily housing does not negatively affect property values, public schools, traffic, and emissions. In many markets, these community issues are in fact improved.

Single-family homeowners are understandably concerned about two community goods: property values CHANGE IN HOME VALUES IN BOSTON for single-family homes and the viability of local public NEIGHBORHOODS WITH NEW MULTIFAMILY schools. Many studies have sought to understand the (IMPACT) AND WITHOUT (CONTROL)1 effects of multifamily housing on these goods. . . Property values for single-family homes are not . . harmed, and in fact are often boosted, by the arrival of nearby multifamily housing development. Time series analyses of seven areas in Boston found that home values were generally boosted by being near pioneering multifamily housing developments over . . the course of thirty years, relative to areas without such development.1 This study has been replicated in numerous cities, such as Portland, Richmond, and in numerous cities and regions, with similar results.2 hase I hase II hase III Similarly, multifamily housing does not place undue strain on local public schools. This concern is premised on the assumption that multifamily Impact Area Control Area developments will bring in too many with school-age children while yielding lower tax revenues. In fact, residents of multifamily housing typically have far fewer children, while the net impact of multifamily housing on a city’s fiscal health is positive when considering the increase in tax revenues.

AVERAGE NUMBER OF SCHOOL-AGE CHILDREN PER 100 UNITS OF HOUSING*3 52 27 61 22 in single- in apartment in new single- in new family homes units family homes apartment units

1 Pollakowski et al., 2005. “Effects of Mixed-Income, Multi-Family Rental Housing Developments on Single-Family Housing Values.” 2 Streets MN, 2016. “No, Large Apartment Buildings Won’t Devalue Your Home.” 3 NAHB Special Studies, 2017. * For recent mover households.